XML 48 R11.htm IDEA: XBRL DOCUMENT

Leases

9 Months Ended

Oct. 01, 2019

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through January 2035. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of 5 to 15 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Lease expense associated with rent escalation and contingent rental provisions is not material and is included within operating lease cost. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Supplemental balance sheet information related to leases is as follows (in thousands):



Classification		October 1, 2019
Assets
Operating	Operating lease assets, net	$	212,760
Finance	Finance lease assets, net ⁽¹⁾	896
Total leased assets		$	213,656
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	22,431
Finance	Current finance lease liabilities ⁽²⁾	756
Long-term lease liabilities
Operating	Long-term operating lease liabilities	229,157
Finance	Long-term finance lease liabilities ⁽²⁾	158
Total lease liabilities		$	252,502

_____________________


(1)	The finance lease assets are included in property and equipment, net in the Condensed Consolidated Balance Sheets.


(2)	The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion was included in other long-term liabilities in the Condensed Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):



		Fiscal Quarter Ended			Three Fiscal Quarters Ended
Classification		October 1, 2019			October 1, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	10,251		$	30,583
Finance lease cost
Amortization of lease assets	Depreciation and amortization	161			511
Interest on lease liabilities	Interest expense, net	18			58
		10,430			31,152
Sublease income	Franchising royalties and fees, and other	(184		)	(384		)
Total lease cost, net		$	10,246		$	30,768

Future minimum lease payments required under existing leases as of October 1, 2019 are as follows (in thousands):



	Operating Leases		Finance Leases		Total
Remainder of 2019	$	10,815	$	158	$	10,973
2020	43,172		539		43,711
2021	42,375		216		42,591
2022	42,184		44		42,228
2023	40,831		14		40,845
Thereafter	189,439		9		189,448
Total lease payments	368,816		980		369,796
Less: Imputed interest	117,228		66		117,294
Present value of lease liabilities	$	251,588	$	914	$	252,502

Operating lease payments include $158.2 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $3.4 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease term and discount rate as of October 1, 2019 are as follows:



	October 1, 2019
Weighted average remaining lease term (years):
Operating	9.5
Finance	2.0
Weighted average discount rate:
Operating	8.69	%
Finance	7.20	%

Supplemental disclosures of cash flow information related to leases for the third quarter and the first three quarters ended October 1, 2019 are as follows (in thousands):



	Fiscal Quarter Ended		Three Fiscal Quarters Ended
	October 1, 2019		October 1, 2019
Cash paid for lease liabilities:
Operating leases	$	10,795	$	32,301
Finance leases	223		600
	$	11,018	$	32,901
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	2,646	$	7,856
Finance leases	—		229
	$	2,646	$	8,085

Leases